Bayerische Motoren Werke Aktiengesellschaft (ETR:BMW) reported lower second-quarter earnings as declining demand in China, increased competition in international markets, tariffs and currency effects weighed on its automotive business.
Group revenue totaled €31.3 billion in the second quarter and €62.3 billion for the first six months of 2026. Earnings before tax fell 35% year over year to €1.7 billion in the quarter, while first-half earnings before tax declined 29.4% to about €4 billion. The group’s earnings-before-tax margin was 5.4% in the quarter and 6.5% for the first half.
China Decline Offsets Growth in Europe and U.S.
BMW Group delivered approximately 591,000 BMW, MINI and Rolls-Royce vehicles during the second quarter, a 4.9% decline from a year earlier. BMW-brand deliveries fell 7.7% to about 509,000 vehicles, while MINI deliveries rose 17.1%, supported by demand for its all-electric models.
Regional performance varied significantly. Retail sales rose 7.6% in Europe and 9.4% in the Americas, with U.S. deliveries increasing 11.9%. Chief Financial Officer Walter Mertl said higher deliveries of internal-combustion-engine vehicles more than offset lower battery-electric vehicle sales in the U.S.
In China, however, BMW Group retail sales declined 30.2% between April and June as the downturn accelerated, particularly in the non-electrified vehicle segment. First-half retail sales in China were down 20.4%, broadly in line with the company’s cited 20.2% decline for the overall market.
Deliveries in the Asia-Pacific, Eastern Europe, Middle East and Africa sales region fell 10.9%, or about 9,000 vehicles. Mertl said the region was affected by spillover effects from China and weaker consumer sentiment linked to the conflict in the Middle East.
Automotive Margins Hit by Tariffs and Competition
Automotive segment revenue declined 7.7% to €27.2 billion in the second quarter. Segment EBIT was €629 million, equating to a reported EBIT margin of 2.3%, compared with €2 billion and a 3.6% margin for the first half.
The reported quarterly automotive margin included a 1.25-percentage-point impact from elevated tariffs and a 1.2-percentage-point impact from depreciation related to the BBA purchase price allocation, Mertl said. Currency movements reduced automotive EBIT by around €400 million, while the combined effect of volume, model mix and pricing was negative by about €1.8 billion from the prior-year quarter. BMW said a large portion of that pressure related to China.
The company reported cost-reduction progress, with selling and administrative expenses falling around €200 million year over year in the second quarter. BMW said it reduced expenditures by €400 million in the quarter and €900 million in the first half, while first-half capital expenditures declined by more than 30%.
Automotive free cash flow was about €500 million in the second quarter and €1.3 billion in the first half. Inventory buildup reduced quarterly free cash flow by approximately €1.3 billion because production exceeded sales volumes. Mertl said BMW had adjusted production planning and aimed to bring inventories closer to the prior-year level by year-end. The company continues to target automotive free cash flow above €2.5 billion for the full year.
Electrified Sales and Product Rollout
BMW delivered about 117,000 all-electric vehicles worldwide in the second quarter, including plug-in hybrids, and sold roughly 163,000 electrified vehicles. Battery-electric vehicles represented 19.8% of group deliveries, while electrified vehicles represented 27.6%.
Europe remained the main source of battery-electric growth. BMW said European BEV sales rose 38% year over year to more than 81,000 units, with nearly one in three vehicles sold in the region being all electric. The company said this performance supports its expectation of meeting European Union carbon-dioxide emissions targets in 2026.
Nedeljković said the BMW iX3 was approaching 100,000 orders. The company introduced a second shift at its Debrecen plant ahead of schedule, and the facility had produced 50,000 iX3 vehicles since series production began, which he described as BMW’s fastest new-plant ramp-up. BMW also began initial orders for the i3 Launch Edition earlier than planned, with regular ordering scheduled to open at the end of September.
By the end of next year, BMW expects to have introduced 40 new or updated models, including long-wheelbase iX3 and i3 models for China that will be produced in Shenyang.
Restructuring and Outlook
BMW is accelerating cost-reduction and restructuring efforts, including a voluntary severance program for indirect functions in Germany agreed with the General Works Council. Nedeljković said the structural initiatives are intended to reduce fixed costs on a sustained basis, with effects expected from 2027 onward.
The company is also reviewing its customer journey, organizational structure, purchasing and delivery processes, and engineering operations. Nedeljković cited greater use of artificial intelligence, faster decision-making, a broader local-for-local approach and increased engineering standardization among the planned changes.
BMW confirmed the full-year guidance it updated in June. It expects group earnings before tax to decrease significantly, automotive deliveries to decline slightly, and automotive EBIT margin to range from 1% to 3%. That outlook includes a potential burden of up to 1.25 percentage points from the workforce restructuring program.
The motorcycle segment is expected to post an EBIT margin of 4% to 6%, while the financial services segment is expected to generate a return on equity of 13% to 16%. BMW’s financial services business reported first-half earnings of about €1 billion, down 15.4%, while its motorcycle segment reported an EBIT margin of 15.2%.
The company also said it completed the second tranche of its third share repurchase program on June 26 and began the final tranche on July 1. The program is expected to reach its full €2 billion volume by no later than Nov. 30.
About Bayerische Motoren Werke Aktiengesellschaft (ETR:BMW)
Bayerische Motoren Werke Aktiengesellschaft, together with its subsidiaries, engages in the development, manufacture, and sale of automobiles and motorcycles, and spare parts and accessories worldwide. It operates through Automotive, Motorcycles, and Financial Services segments. The Automotive segment engages in the development, manufacture, assembling, and sale of automobiles, spare parts, accessories, and mobility services under the BMW, MINI, and Rolls-Royce brands. The Motorcycles segment develops, manufactures, assembles, and sells motorcycles and scooters under the BMW Motorrad brand, as well as spare parts and accessories.
